Mortgage rates pulled down again by economic uncertainty

Mortgage rates are at their lowest level since the end of last year, following the sixth consecutive week of drops, as concerns over the U.S. economy take hold.

The 30-year fixed-rate mortgage averaged 6.76% on Feb. 27, the Freddie Mac Primary Mortgage Market Survey reported. It was down 9 basis points from last week when it averaged 6.85%, while a year ago it was 6.94%.

Meanwhile, the 15-year FRM was at 5.94%, compared with 6.04% on Feb. 20. For the same week in 2024, it averaged 6.26%.

"This week, mortgage rates decreased to their lowest level in over two months," said Sam Khater, Freddie Mac's chief economist in a press release. "The drop in mortgage rates, combined with modestly improving inventory, is an encouraging sign for consumers in the market to buy a home."

The drop is "fueled by falling Treasury yields, driven by weaker consumer spending data and signs of a cooling economy," added Samir Dedhia, CEO of One Real Mortgage in a statement. "As uncertainty lingers, investors are shifting toward bonds as a safe haven, helping to push mortgage rates lower."

That uncertainty is expected to result in persistent market volatility over the coming months, "as economic policies and data continue to influence investor sentiment," Dedhia continued.

The 10-year Treasury yield is down nearly 29 basis points since its latest peak of 4.58% during trading on Feb. 19. Unlike the short-term rates controlled by the Federal Open Market Committee, the 10-year, one of the benchmarks used in pricing mortgages, is more reflective of how investors feel about the economy.

As of 11 a.m. on Feb. 27, the yield was at 4.29%, up 4 basis points on the day. At that same time, the Zillow rate tracker put the 30-year fixed at 6.29%, down 2 basis points on the day and 22 basis points lower than the 6.51% average for the prior week.

Lender Price data on the National Mortgage News website showed the 30-year FRM at 6.787%, unchanged on the day.

It is unclear how long this downward trend will last, added Kara Ng, senior economist at Zillow Home Loans, in a Wednesday night statement.

"Consumer confidence declined more than expected in February, with the sharpest drop in three-and-a-half years, more than reversing the initial burst of optimism following the November election," Ng said. "While overall economic data remains strong, uncertainty over fiscal, labor, and economic policies highlights potential downside risks."

But Ng warned that mortgage rates are not guaranteed to stay at the current lows.

"The week was relatively light on data, compared to the sustained downward pressure on rates," Ng noted. "Major upcoming economic releases such as the latest personal consumption expenditures inflation data on Feb. 28 or the next Bureau of Labor Statistics employment report on March 7 could easily shift the market narrative again from downside growth to upside inflation concerns, and cause mortgage rates to rise again."

The Mortgage Bankers Association tracks rates in the Weekly Application Survey that it released on Wednesday and it too is showing the downward trend.

"Softer economic data, including declining consumer sentiment and spending, have caused mortgage rates to decrease for four straight weeks," said Bob Broeksmit, president and CEO in a Thursday morning statement. "Despite the recent decline, applications have seesawed lately, down 1.2% last week."

The organization's economists now expect the 30-year FRM to edge lower this year, ending at 6.5%, Broeksmit added.